By Ira Iosebashvili The dollar fell against the euro and yen Monday, as investors locked in profits on recent gains in the U.S. currency on fears that unstable Chinese stock markets could keep the Federal Reserve from raising U.S. interest rates in coming months. The euro was recently up 1.1% against the dollar at $1.1096, its highest level in more than two weeks. The dollar was down 0.6% against the yen at Yen123.06. Chinese stocks tumbled to their sharpest loss since 2007 Monday, falling 8.5% on worries that authorities are pulling back on measures to support the market. Some investors believe the turmoil in Chinese equities will make the Fed more cautious when it comes to tightening monetary policy, prompting them to sell dollars and buy the euro and yen. The prospect of a rate increase as early as September has boosted the dollar in recent weeks, as higher U.S. borrowing costs make the dollar more attractive to investors seeking yield. "We have to become rock solid convinced that the Fed is moving in September to get the next leg of the dollar rally," said Kit Juckes, a strategist at Societe Generale. "On a day like today, it's hard to be convinced." Investors are awaiting the conclusion of the Fed's monetary policy meeting Wednesday, as they look for fresh hints regarding the timing of the central bank's rate increases. Fed Chairwoman Janet Yellen emphasized in congressional testimony earlier this month she expects the central bank to start lifting its benchmark federal-funds rate at some point before year-end. The Wall Street Journal Dollar Index, which measures the bucks against a basket of 16 currencies, was recently down 0.6% at 87.98. Write to Ira Iosebashvili at ira.iosebashvili@wsj.com (END) Dow Jones Newswires

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